US Embargo Against Cuba Affects Canadian Internet Entrepreneurs

Recently, the decades-old US embargo against trade with Cuba has been invoked against Canadians, this time involving business activity carried on over the Internet. Hola Sun Holidays Limited (Hola) has been designated by the US Treasury Department, Office of Foreign Asset Control, as a Cuban-controlled entity. As a result of this designation, anyone governed by US jurisdiction is prohibited from doing business with Hola under the US Trading With The Enemy Act (1917). (While newspaper reports speculated whether the US designation derived from a mistaken perception that the Toronto owner of Hola, Fidel Ferrer Castro, is a relative of the Cuban dictator, nevertheless the designation stands). For businesses with an online presence into the US, care must be taken to avoid offending the US anti-Cuba sanctions. US assets or accounts of entities designated as Cuban-controlled by the US Treasury Department can be seized, penalties can be levied and those entities prohibited from doing further business in the US. Recently, another Canadian businessman, James Sabzali, was fined US$10,000 and sentenced to a year of probation for violating the embargo by "˜smuggling' water purification supplies to Cuba. Several governments, including those of Canada and the UK, dispute the right of the US Treasury Department to give US laws extraterritorial effect (in the case of Canada, this disagreement finds expression through the "blocking" statute, the Foreign Extraterritorial Measures Act, RSC 1985, c F-29). However, such legislation is likely to be of cold comfort to companies doing business online into the US and Cuba, and they will want to carefully consider the risk of non-compliance with the US legislation. For the news report, visit: http://makeashorterlink.com/?R155222E7. For the US Office of Foreign Asset control, see: http://www.treas.gov/offices/eotffc/ofac/sdn/index.html. For the announcement of Hola Sun Holidays Limited designation, visit: http://www.treas.gov/offices/eotffc/ofac/actions/20040317.html. Summary by: Nicholas Whalen